Importing a car to Iceland comes with a complex tax system. This guide breaks down excise duties, VAT, and how to calculate your total cost.
Iceland is not a member of the European Union, which means vehicles imported into Iceland do not benefit from EU single-market rules on goods movement. Every vehicle entering Iceland from abroad — whether new from a manufacturer or used from a private seller — is subject to Icelandic customs duty and excise taxes. The system is layered, calculated on multiple variables, and can add hundreds of thousands of ISK to the effective purchase price of a vehicle. Understanding it before you buy is essential.
The authority responsible for customs and import duties in Iceland is Tollstjórinn (the Directorate of Customs). Vehicle registration after import is handled by Samgöngustofa.
Importing a vehicle to Iceland involves two distinct charges that are often confused:
A percentage levy on the customs value of the vehicle (typically the invoice price for new vehicles, or an assessed market value for used ones). For most passenger cars, the standard customs duty rate is 0% for vehicles from countries with which Iceland has free trade agreements (the EEA, EFTA, and others). However, customs duty can apply at non-zero rates for vehicles from certain countries — check with Tollstjórinn for specific rates based on country of origin.
This is the significant charge — a domestic excise tax on all newly registered vehicles regardless of origin. It is calculated using a formula that weights:
The CO2 rating used for Icelandic import tax calculation must be the official WLTP (Worldwide Harmonised Light Vehicle Test Procedure) figure from the vehicle's certificate of conformity (CoC). This is not the NEDC figure (an older, more optimistic testing standard). If a manufacturer's documentation only shows NEDC figures, Tollstjórinn will apply a conversion factor — which typically produces a worse result than the actual WLTP figure. Always ensure you have the official WLTP CO2 certificate for any vehicle you are importing.
Iceland heavily subsidised EV imports from approximately 2015 to 2023, with zero excise duty on pure electric vehicles being the most significant incentive. This was a major driver of Iceland's extraordinary EV adoption rates. From 2024 onwards, the Icelandic government began phasing in excise duty for EVs as part of fiscal normalisation and road-funding considerations:
The political and regulatory situation regarding EV incentives is actively evolving in Iceland. Always verify current rates with Tollstjórinn or a licensed customs agent before completing an import.
To illustrate the impact, consider three vehicles with a similar purchase price of approximately 6,000,000 ISK:
Excise duty for a vehicle in this CO2 band typically results in a registration tax of approximately 1,200,000–1,600,000 ISK. The effective landed cost including duty and registration exceeds the purchase price by approximately 20–27%.
The dramatically lower CO2 rating results in a significantly reduced excise rate — approximately 400,000–700,000 ISK in registration tax. The PHEV route saves 600,000–900,000 ISK in tax versus the petrol equivalent on the same base vehicle.
Under current (post-2024) policy, a mid-range EV might attract 200,000–500,000 ISK in registration tax. Still dramatically less than a petrol equivalent, but no longer the zero-tax environment of 2020–2023.
Importing a used vehicle to Iceland is legally straightforward but financially complex. Key considerations:
For most individuals, the arithmetic rarely favours importing a used vehicle over buying locally, unless the specific vehicle is unavailable on the Icelandic market or carries a significant price advantage even after all costs are factored in.
Once import duties are settled with Tollstjórinn, the vehicle must be registered with Samgöngustofa. The process requires:
The typical processing time from submitting all documents to receiving Icelandic registration plates is 1–3 weeks for standard cases, though backlogs at Samgöngustofa can extend this during busy periods.
Iceland's car insurance has exclusions that surprise thousands of visitors every year — sand damage, gravel chips, and F-roads void most standard rental cover. Here's the complete guide to staying protected.
Frá skráningargjaldi til vetrardekka og trygginga kemur heildarkostnaður við bíleign á Íslandi mörgum á óvart. Hér er heildarlyfirlit.
